Biggest Gain In More Than 2 Years For Housing

NEW YORK (CNNMoney) -- In another sign of a housing market rebound, home prices posted the biggest percentage gain in more than two years in the third quarter, according to the closely followed S&P/Case-Shiller index

This latest rise comes as the housing market has shown numerous other signs of recovery in recent months. The rebound is spurred by a combination of record low mortgage rates, an improving jobs market and a drop in foreclosures to a five-year low, reducing the supply of distressed homes available. There is also a tighter supply of both new and previously owned homes on the market.

Dean Baker, the co-director of the Center for Economic and Policy Research who was one of the earliest economists to warn about the housing bubble and the trouble that lay ahead, said this recovery in the housing market should lead to some sustained housing price increases in the coming years.

"I've been an optimist as of late," he said. "Some think it'll get back to bubble prices and that's crazy. But we'll probably do better than inflation for the next few years, and people who have been underwater on their mortgage will get out from that, and build some equity."

The latest rise in the Case-Shiller index was the second straight quarter of year-over-year improvement, while the monthly annual reading has climbed for four months in a row, with six straight month-over-month increases.

"With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market," said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.

Case-Shiller Index co-author Robert Shiller spoke with FOX Business Network (FBN) about his concerns surrounding the rising house prices. Shiller said that he believes some people have become “kind of trigger happy” and that “this might be the beginning of another boom,” but cautions that as a result “markets might be more volatile going forward.”

Shiller further states that he thinks the housing prices “will probably go up at a modest pace,” but there is still a possibility “of declines.”